You Are Analyzing a Project and Have Prepared the Following

question 358

Multiple Choice

You are analyzing a project and have prepared the following data: Based on the profitability index of _____ for this project, you should _____ the project.

• A) 0.87; accept
• B) 0.87; reject
• C) 1.02; accept
• D) 1.02; reject
• E) 1.08; reject

---

Definitions:

Compound Interest

A way of calculating interest whereby the charge is based on the initial principal amount as well as on the interest that has accumulated in prior periods of a loan or deposit.

Cash Inflow

Money received by a business, typically from operational, investing, and financing activities.

Net Present Value

The difference between the present value of cash inflows and outflows over a period of time, used to assess the profitability of an investment.

Compound Interest

This refers to the calculation of interest on both the initial amount deposited or borrowed as well as on the interest that has already been accumulated over previous periods.